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This is known as satisficing.
If the firm wants to maximize its profits it will try to equate marginal revenue and marginal cost. Marginal cost refers to the increase in the total costs of a firm caused by increasing its output by one extra unit. From the viewpoint of economists, firms normally produce at a point at which the marginal costs are positive. Marginal revenue refers to the receipt from selling an extra unit of output. On the other hand, when the firms go for satisficing the managers of a firm need to make enough profit in order to satisfy the demands of their shareholders. Satisficing or profit satisficing denotes the managerial behavior that attempts to achieve some level profits. Once the satisfactory level of profits has been achieved, the managers are free to maximize their rewards that can be available from the particular company.
All the markets are in equilibrium when the demand and supply are equal. Equilibrium or equilibrium price refers to the price level of a particular commodity at which quantity demanded equals quantity supplied. Here the price and quantity demanded are having a negative relation. The variables which are negatively related, for example price and quantity demanded, have an inverse relation. Here the price is a determinant and the quantity is determined. An increase in the price leads to a fall in the quantity demanded and vice versa.
There are many inversely related variables in economics, for example rate of interest and borrowing, economic growth and balance of payment, unemployment and inflation etc, that is an increase in the rate of interest, an increase in the economic growth and an increase in the unemployment will cause a fall in borrowing, balance of payment and unemployment respectively.
The actual market always tends towards the equilibrium price where demand and supply curves cut each other.
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For instance, Adam Smith’s theory of the invisible hand argues that when people engage in business and selling they are governed by the invisible hand of the market that helps regulate prices and ensures that businesses and people act in certain ways. Indeed, the nature of economics is like psychology in that it presents theories of human behavior.
As such, economic analysis relates to the study of economic systems in an industry to ascertain the effectiveness of the operations of a given industry with reference to its profitability1. With this, we are able to establish the optimum use of the limited resources to achieve a given economic objective.
Thus, short-run is the time period that quantity of an input or at least one of the many inputs is fixed while other inputs’ quantities can vary. Long-run on the other hand is that time period where inputs in entirety can be varied. Therefore, there is no specific time that can be taken as fixed or even marked on the dates of the calendar to distinguish short-run from the long-run.
If the quantity demanded of a certain product changes minimally or does not change at all, then that product is said to be a Price Inelastic Good. Consequently, if a product whose price increased and such a change brought forth an abrupt drop in quantity demanded of the same product, the good is said to be Price Elastic.
e that the people of a country would receive the best of every thing that could be education, housing, health services or the other various basic necessities.
Economics has been called and is known as a Social Science one that actually focuses on the subject matter that is
sought to apply a broader theoretical and conceptual tradition of economic thought by placing emphasis on neo-classical synthesis – a combination of neo-classical economics and Keynesian economics.
Conservative economics is based on Milton Friedman’s teachings and
s the above figure illustrates, if there is a supply shock in an economy (such as increase in the price of oil, labor or other costs that increase the cost of doing business), the short run AS curve shifts to the left. The real GDP decreases from Q to Q’ and the price level
These tools enable professional mainstream economists to address various economic issues facing the world. Mainstream economics is about modeling in a way that traditional or heterodox economics is not. It originated from the neoclassical synthesis of the neoclassical
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